This is what I called short sighted finite thinking on the part of the Intelligence Community managers.

This is also what I called (for some years now) a swindle of the tax payers. First, they find or create weaknesses then they don’t fix these weaknesses so we are all vulnerable to attack.

Then, when attacks occur, they say they need more money for cyber security — a total swindle!!! [Indeed.]

This is only the second swindle of the public. The first was terror efforts by saying we need to collect everything to stop terror — another lie. They said that because to collect everything takes lots and lots of money.

Then, when the terror attack occurs, they say they need more money, people and data to stop terror. Another swindle from the start. [The war on terror is a “self-licking ice cream cone”, because it creates many more terrorists than it stops.]

And, finally, the latest swindle “THE RUSSIANS DID IT.” This is an effort to start a new cold war which means another bigger swindle of US tax payers.

For cyber security, I would suggest the president order NSA, CIA and any others to fix the cyber problems they know about; then, maybe we will start to have some cyber security.

The bottom line is that our intelligence services should start concentrating on actually defendingus, rather than focusing on offensive mischief.

* Binney is the NSA executive who created the agency’s mass surveillance program for digital information, who served as the senior technical director within the agency, who managed six thousand NSA employees, the 36-year NSA veteran widely regarded as a “legend” within the agency and the NSA’s best-ever analyst and code-breaker, who mapped out the Soviet command-and-control structure before anyone else knew how, and so predicted Soviet invasions before they happened (“in the 1970s, he decrypted the Soviet Union’s command system, which provided the US and its allies with real-time surveillance of all Soviet troop movements and Russian atomic weapons”).

Readers are familiar with the various microwave and laser arrays located at the real New York Stock Exchange in Mahwah, New Jersey, both of which we have written about in the past.

Microwave tower located next to the NYSE in Mahwah, NJ.

This article, however, is not about the familiar antennas off Route 17 in New Jersey. Instead, demonstrating to what lengths the high frequency traders will go for just a few millisecond advantage – which makes in the HFT world makes all the different between billions in profits and losses – Bloomberg reports that a mysterious antenna has emerged in an empty field in Aurora, near Chicago, and a trading fortune depends on it.

Strange? Of course: as BBG’s Brian Louis admits “it was an odd transaction from the outset: $14 million, double the going rate, for a 31-acre plot of flat, undeveloped land just west of Chicago. In the nine months since, the curious use of the space has only added to the intrigue. A single, nondescript pole with two antennas was erected by a row of shrubs. Some supporting equipment was rolled in. That’s it.”

As it turns out, those antennas – as readers may imagine – were anything but ordinary. Same goes for the buyer of the property: anything but your typical land investor, although the name will be all too familiar to those who have followed our reporting on HFT over the years: it was Jump Trading LLC, “a legendary and secretive trading firm that’s a major player in some of the most important financial markets.”

Equipment on land purchased by an affiliate of Jump Trading

Jump Trading affiliate World Class Wireless purchased the 31-acre lot for $14 million, according to county records. “They paid probably twice as much as it’s worth,” said David Friedlandof Cushman & Wakefield. “I don’t see anyone else paying close to that price.”

There was a reason why Jump overpaid so much: it was an investment into guaranteed future returns.

Because ultimately the purchase was all about the location: just across the street lies the data center for CME Group, the world’s biggest futures exchange. By placing its antennas so close to CME’s servers, Jump hopes to shave maybe a microsecond off its reaction time, enough to separate a winning from a losing bid in trading that takes place at almost the speed of light. Enough to make billions in profits if done successfully millions of times every minute for year.

As Bloomberg describes the land grab, “it was the latest, and perhaps boldest, salvo in an escalating war that’s being waged to stay competitive in the high-speed trading business.”

The war is one of proximity — to see who can get data in and out of CME the quickest. A company called McKay Brothers LLC recently won approval to build the tallest microwave tower in the area while another, Webline Holdings LLC, has installed microwave dishes on a utility pole just outside the data center.

“It tells you how valuable being just a little bit faster is,” said Michael Goldstein, a finance professor at Babson College in Babson Park, Massachusetts. “People say seconds matter. This is microseconds matter.”

It also tells you something else: at its core, modern trading is simply about being faster than your competition: no thinking goes into the trade, only reaction times matter. That, and frontrunning your competition. Some more details about this literal land grab:

In October 2015, McKay Brothers, a company that sells access to its microwave network to high-speed traders, leased land diagonal to the CME data center, under the name Pierce Broadband LLC, according to DuPage County property records.

Last month, the county gave McKay approval to erect a 350-foot high microwave tower that could be 600 feet closer to the data center than its current location, records show. Two trading firms, IMC BV and Tower Research Capital LLC, own minority stakes in McKay. Co-founder Stephane Tyc said his firm may never build the tower but it would be part of the firm’s continual efforts to speed transmission time.

Then there’s Webline Holdings. In November 2015, it was granted a license to operate microwave equipment on a utility pole just outside the data center, according to Federal Communications Commission records. Webline has licenses for a microwave network stretching from Aurora to Carteret, New Jersey, where Nasdaq Inc.’s data center is located. Messages left for Webline were not returned.

Back to the mysterious antenna: according to Bloomberg, the license for the transmission dishes is held by a joint venture between World Class and a unit of KCG Holdings, another HFT trading firm that was recently acquired by Virtu Financial. In other words, the “who is who” of HFT has been unleashed on an empty field near Chicago, and to the builder will go the spoils.

It could be billions in revenues.

* * *

After all this frentic building of microwave tower, who is closest to the CME servers? It is unclear. Trading data first leaves CME computers via fiber cable, and then to nearby antennas that send it by microwave to other towers until it reaches New Jersey, where all the major U.S. stock exchanges house their computers. The moves in Aurora are intended to reduce the time that the data is conveyed through cable; the practical impact is shaving off a millisecond or maybe even a few nanoseconds.

At its core, the race is about latency arbitrage, and not being the slowest firm on the block – a recipe for financial ruin. Sending data back and forth between the U.S. Midwest and East Coast allows high-frequency traders to profit from price differences for related assets, including S&P 500 Index futures in Illinois and stock prices in New Jersey. Those arbitrage opportunities often last only tiny fractions of a second.

Ironically, all the land grab and overpriced land purchases could be made obsolete with one simple decision: a microwave tower could be installed on the roof of the CME data center to eliminate the need for jockeying around the site, the same way the NYSE has a microwave tower next to its NJ headquarters. The exchange is indeed looking at allowing roof access, along with CyrusOne, the company that bought the data center last year, CME said in a statement. Traders being traders, however, they may continue to battle, this time for the most advantageous position on the microwave tower itself.

“We are confident the CME can provide an alternate and better solution which offers a level playing field to all participants,” said McKay’s Tyc.

Which is ironic because at its core, modern High Frequency Trade is about everything but a level playing field: after all there are millions of traders to be frontrun, take that away, and the HFT parasites of the world have no advantage whatsoever.

Yesterday (the day after I first published my original article on the Trump-Nixon comparisons that are now screaming in everyone’s face), Trump was interviewed by Lester Holt on NBC and contradicted everything his press team had said about the firing of FBI Director James Comey, stating that it was entirely his idea from the beginning to fire Comey and that his reason was particularly related to the FBI investigation of the Trump-Russia conspiracy, though Trump implied his move was to help the investigation gain more credibility (and speed), not to impede it. (Apparently trusting his salesmanship enough to actually think people would believe him when he said with a straight face in the interview — that his purpose was to help the FBI investigate him and Russia more thoroughly … albeit expeditiously … and to build America’s trust in the outcome of the investigation.)

Then today, as if Trump’s immediate contradiction of his entire press staff wasn’t peculiar enough, President Donard Trixon purposely established the most blatant tie between himself and Tricky Dick Nixon he possibly could have come up with. In order to prove he’s not a crooked Dick, he threatened (as Richard “I’m not a crook” Nixon would have done) the FBI director that he just fired (as Nixon would have done) by implying in a tweet that he will (in a manner that begs Watergate déjà vu) release the SECRET RECORDINGS he apparently has of conversations between himself and James Comey!

Oh, my goodness! Even as numerous readers on Zero Hedge criticize me for laying out the Nixonian comparisons, Trump decides to heap more ready-made material on top for me! Yes, if the former FBI director dares to act like Deep Throat (the high-level FBI director who became the primary informant during the Watergate scandal) by leaking information to the press (as Deep Throat did to Bob Woodward and Carl Bernstein of The Washington Post),Trump implied he will use secrete recordings he has apparently made of his conversations.

Oh my gosh! Just when I thought the Nixon connections couldn’t get any more obvious! And Trump is the one creating all of them!

The result, of course, of this blatant attempt to silence the FBI, is that leaks are now bursting out everywhere:

At a moment of crisis, the White House looks surrounded on the outside and divided on the inside.

“It’s total chaos,” said one former transition team official with close ties to the administration.

“It’s image-making on the inside and people trying to protect themselves. There is a deep streak of paranoia among staff. The communications team shit the bed on the Comey firing and now the war with the FBI has them all scared and throwing each other under the bus.”Thank God I don’t work there. If I did, I’d be dialing up my attorney.”

…

The unusually detailed accounts of inner turmoil frustrated Trump’s allies in the media, like Matt Drudge, who runs the enormously influential conservative aggregation website Drudge Report. “We never got 1 damaging leak out of Obama White House staff in 8 yrs. Under Trump, they appear hourly. BIG DANGER: Small leaks sink ships!!” Drudge said in a flurry of tweets.

“Trump advisers leaking to media are now deliberately sabotaging presidency. Major house cleaning needed for survival. Leaks on hour, every hour, will destroy Trump presidency. There’s a Trojan horse plotting within the inner circle!” (The Hill)

I think, and have stated even before Trump was elected, the Trojan horse is Trump. This is a White House falling apart at the seams as everyone is starting to realize they may really be serving a lunatic president. Like Don Quixote jousting at windmills, Trump has gone from fighting the deep state to fighting Deep Throat (or, at least, someone he fears will become Deep Throat). But the most amazing part of this is that, each step of the way, Trump is the one setting up scenes that are screaming for comparisons to Richard Nixon. He has now filled the chocolate box with morsels of Watergate-tasting treats ready-made for the press’s consumption.

Trump’s own suspicious nature (like Nixon’s) creates suspicion. For example, I now ask what exactly is it that Trump so greatly fears James Comb-me-over will leak? At this point, I more than suspect something is there because “leaks” (Trump’s chosen word — and Trump “has and uses the best words” — are about real things you don’t want known, or they wouldn’t be called “leaks.” Trump’s not-even-slightly-veiled threat to Comey could have warned that he would reveal his recordings if Comey “lied” about the president or “denied” the truth or “fabricated” things to be more than they were.

However, Trump did not threaten to reveal secret recordings if Comey comes out and lies about him. He threatened to reveal secret recordings if Comey “leaks” information. It’s not a leak if it’s a lie. So, Trump practically admitted there is truth Comey knows that Trump is very afraid of — so afraid that it appears to have sent him completely out of control of himself as he actually threatened Comey in a very public way, should Comey come out with any of it.

And, of course, threatening the just-fired FBI director if he comes out with any information is a thinly veiled threat to the entire FBI because, if Trump will play get-even with their beloved director, he’ll play get-even with any one of them that dares to open his or her mouth. The FBI is familiar with how these kinds of threats are to be understood. How close is that threat from the most powerful person in the world (and the FBI’s commander-in-chief) to being an illegal impedance of justice?

Unbelievable! This is just getting richer by the day as we watch President Donard Trixon dig his way deep into the manure pile of history and then pull it down over his own comby head.

Is this what it looks like when a narcissist who started his career in the Watergate era self-destructs? This week’s stunning images of self-destruction and of a White House flying apart at the seams as its press agents literally run for cover in the hedges and beg news agencies to “turn the lights off” will be talked about for years and years to come.

The percentage of new car ‘sales’ moving off dealer lots via leases has nearly tripled since late 2009 when they hit a low of just over 10%. Over the past 6 years, new leases, as a percent of overall car sales, has soared courtesy of, among other things, low interest rates, stable/rising used car prices and a nation of rental-crazed citizens for whom monthly payment is the only metric used to evaluate a “good deal”…even though leasing a new vehicle is pretty much the worst ‘deal’ you can possibly find for a rapidly depreciating brand new asset like a car…but we digress.

Of course, what goes up must eventually come down. And all those leases signed on millions of brand new cars over the past several years are about to come off lease and flood the market with cheap, low-mileage used inventory. As Reuters noted, the flood of used vehicles is already starting to impact used car dealers:

Recently, though, a computer search for available used vehicles within 150 miles of Reel revealed an eye-popping figure: 668 Escapes. That’s enough to put more than 40 percent of the inhabitants of this small northeastern Ohio town, population 1,600, into the popular crossover.

A search for the Chevrolet Equinox, a comparable crossover, showed 461 available.

“The automakers have flooded the market,” said Reel, owner of Reel’s Auto in Orwell, Ohio, about 40 miles east of Cleveland.

By the end of 2019, an estimated 12 million low-mileage vehicles are coming off leases inked during a 2014-2016 spurt in new auto sales, according to estimates by Atlanta-based auto auction firm Manheim and Reuters.

And, of course, that kind of supply is already starting to take it’s toll on used car prices…

Consumers seeking great deals are in luck. Used-vehicle prices at auction fell about 3 percent last year, according to Carmel, Indiana-based KAR Auction Services Inc (KAR.N), which facilitated the sale of 5.1 million used and salvaged vehicles in 2016. Used prices should drop around 3 percent annually for the next couple of years, according to KAR’s chief economist Tom Kontos.

General Motors Co (GM.N) and Ford Motor Co (F.N) say prices for its used vehicles, which consist largely of nearly-new ones coming off lease to consumers, fell 7 percent in the first quarter versus the same period in 2016. GM says it expects a 7 percent decline for 2017 compared to last year.

…and, as Morgan Stanley recently pointed out, we’re just getting started as they see used car prices dropping by up to 50% over the next 5 years.

So what happens next? Unstable used car prices will almost certainly reduce OEM reliance on leases as the implied 3-year depreciation (or residual values, if you prefer) will make them all but completely uneconomical…remember, Americans only care about that monthly payment. Meanwhile, the relative value between used and new cars will tilt heavily in favor of the used market. Thankfully Americans will still be able to buy that Mercedes they require to get back and forth from their minimum wage jobs, while maintaining a monthly payment of $500 or less, but it will just have to have 30,000 miles on it.

Of course, the OEMs of the world won’t admit that their game is over until it’s way too late. So, they’ll keep right on producing new cars to cover a 17-18mm SAAR environment up until the point they face an outright revolt from their dealer networks. At that point, however, dealer inventories will be so high that Detroit will be forced to shutdown for months on end while new car prices are slashed to reduce the massive inventory glut. Tanking new car prices will put even more pressure on used car prices which will mark the beginning of the death spiral that will result in a new round of inevitable auto bankruptcies…but that’s just a hunch.

I think the U.S. citizenry is being afflicted by a sort of mass insanity at the moment. There are no good outcomes if this continues. As a result, I feel compelled to provide a voice for those of us lost in the political wilderness. We must persevere and not be manipulated into the obvious and nefarious divide and conquer tactics being aggressively unleashed across the societal spectrum. If we lose our grounding and our fortitude, who will be left to speak for those of us who simply don’t fit into any of the currently ascendant political ideologies?

Given our increasingly hysterical, polarized and downright rabid political environment, I think it’s important for those of us who see ourselves as relatively conscious individuals to reflect upon our principles and how they play a role in our everyday lives. As such, today’s piece will examine the concept of whether “the ends justify the means” when it comes to achieving ones objectives, political or otherwise. It’s an extraordinarily important philosophical exercise to undertake, particularly since the turbulent period we inhabit is likely to get far more insane and divisive before it gets better.

I think many people will quickly answer the question “do the ends justify the means” without putting enough thought into it. The question is meant to be considered when it comes to premeditated voluntary actions of questionable ethics taken with a defined objective in mind. It has nothing to do with matters of self-defense, or anything in that category. For example, if someone is coming at your family with an intent to inflict harm, the ethical decision might be to harm the aggressor to protect your family despite the fact that harming another person in itself is an immoral act. Pretty much everyone can agree with this, so it doesn’t add anything to the argument of whether the ends justify the means.

That case is obvious. What about if you’re walking down the street and you see someone come from behind an old lady, hit her on the head and then struggle with her on the ground in an attempt to take her purse. You aren’t being directly attacked, so should you intervene with violence if necessary against the perpetrator to help an innocent bystander? Again, I think the right and ethical decision here is to step in to try to help the victim if possible.

In both these cases the negative “means” of violence you might be required to use against violent aggressors do indeed justify the ends — in the first instance the protection of your family, and in the second a vulnerable old lady. Given these examples, one might be led to believe that the ends can often justify the means, but I would argue that this only holds true in extreme examples such as the ones described above, and that for a principled person, the ends almost never justify the means.

When people seriously consider whether the ends of a particular action justify the means, it’s almost never in relation to scenarios like the ones described above for two reasons. First, those are extremely rare situations that many people (in the developed world at least) will only experience a few of times in the course of a lifetime, if that. On the other hand, many of us face constant but often overlooked ethical dilemmas on a daily or weekly basis. We all face situations where we are confronted with the choice to do something we know is wrong, but perhaps do it anyway either for instant gratification or in the pursuit of a larger goal. This post is focused on the latter.

Many people involved in politics swear by the notion that “the ends justify the means,” which is typically the sign of a self-serving actor attempting to justify questionable if not downright evil action in order to get what he or she wants. While pursuit of “the greater good” is often put up for public consumption, the driving force behind this sort of action is almost always personal gain of some sort. This is what most politicians do for a living, which is why they are justifiably hated by the general public.

He who is ever brooding after result often loses nerve in the performance of his duty. He becomes impatient and then gives vent to anger and begins to do unworthy things; he jumps from action to action, never remaining faithful to any…When there is no desire for fruit, there is no temptation for untruth or hisma. Take any instance of untruth or violence, and it will be found that at its back was the desire to attain the cherished end.

A few pages later he expounds upon the subject.

We should do no work with attachment. Attachment to good work, is that too wrong? Yes, it is. If we are attached to our goal of winning liberty, we shall not hesitate to adopt bad means.

Gandhi clearly did not believe that ends justify the means, and I agree with this conclusion in something like 99% of the ethical dilemmas we regularly face as human beings.

Someone who wants to make the opposite argument might selectively pick certain historical instances where questionable action led to a favorable outcome overall. I don’t dispute that such instances exist, but I’d argue that for each such instance there are hundreds of examples of the exact opposite. In fact, much of the tragic state of the world as it is today can be directly linked to scores of humans constantly justifying unethical behavior in order to advance their own self interests and goals. A primary driver of so much of the unnecessary suffering in the world relates to individuals making immoral decisions they justify to themselves and others as being a necessary part of a larger goal. Notice how these “larger goals” almost always end up benefiting the person taking and justifying the questionable action? That’s your red flag.

To those of you who still disagree with my argument, think about it from the slippery slope perspective. The moment you justify one very wrong action to achieve a noble goal, what’s to stop you from next even more unethical action, or the next and the next? Nothing. This is what’s so dangerous about going down such a path. Indeed, those who fight monsters often end up becoming the exact thing they claim to be fighting. The world doesn’t benefit from this, only the person who has gained power as a result does, at least superficially. Ultimately, even that person doesn’t benefit when all is said and done. A person who attains their goal by sacrificing principles is a tormented, miserable person. They may seem to “have it all” from the outside, but deep down they hate themselves and what they’ve become. There is no peace. I believe karma eventually catches up to everybody one way or the other.

Indeed, so many of the wars, massacres and bloodshed around the world can be directly linked to “ends justify the means” type thinking. That’s exactly what America’s insane neocons use to justify their endless wars of intervention that end up making the world a worse place than it was before. Notice how they always claim their action is to achieve good, yet it always ends up making things worse. Notice how it doesn’t stop them from making the same ridiculous argument over and over again?

Unfortunately, many people don’t have any principles to begin with and simply live their lives in the pursuit of their own superficial, materialistic or egotistical goals. These are the types of people who most often employ “ends justify the means” thinking, which is exactly why those of us who do have principles must reject this way of thinking and pursue a more conscious manner of achieving our ends. If that means our ends aren’t achieved in our lifetime that’s something that must be accepted. The means we use will reverberate in the universe forever and will benefit the world whether we’re able to point to definitive results or not.

As Gandhi also wrote:

If we take a total view, we shall see that it is not wickedness but goodness which rules the world. The wicked can prevail only when they number multitudes, but goodness will rule when embodied to perfection even in one person. Nonviolence has been described as so powerful that all forces of violence subside in its presence. Under its influence, even beasts forget their nature. Even one good person can change the world. Such a one enjoys an empire over people’s hearts…

Where wickedness prevails, there is disorder in every field of life, but where goodness rules, order prevails and people are happy. They are happy not in the sense that their material needs are satisfied, but in the sense that they lead virtuous and contented lives. As for material possessions, some men have fortunes in rupees and yet have a distracted life. That is no sign of being happy.

Gandhi was himself a victim of the violence he so despised, but his timeless message lives on and he wouldn’t harbor any bitterness or anger to those who gunned him down. I first read the words above nearly a decade ago, and they’ve stayed closely beside me ever since. I hope they connect with you as well.

Keep striving, keep learning and keep growing. Thanks for joining me on this wild ride that is life.

Venezuela’s ongoing economic and humanitarian crisis has assumed graver proportions over the past five weeks and pressure is mounting for a regime change, even as doubts persist over the likelihood of the next presidential elections, originally set for October 2018. Fresh protests broke out after President Nicolas Maduro earlier this month signed an order aimed at forming a new constituent assembly of some 500 members and rewriting the country’s constitution to reshape his powers and those of legislators.

Many Venezuelans clearly saw Maduro’s ruling as a way to snatch powers from the opposition-led National Assembly and consolidate it in a constituent assembly over which he might have a better hold. “[Maduro] tried to do this as a way to unite the country, but it was seen as an attempt to retain power and sparked the latest round of protests,” said William Burke-White, director of the Perry World House and professor at the University of Pennsylvania Law School.

Venezuela’s crisis has probably hit a tipping point and Maduro’s days in power are numbered, said Burke-White. “The path forward is Maduro will be pushed out of power, or there will be a repressive, horrible crackdown where the death tolls keep mounting,” he noted. “It may be better to be moving in that direction [towards Maduro’s ouster] than be in an ongoing political quagmire that we have been in for the last few years.”

According to Dorothy Kronick, a political science professor at the University of Pennsylvania, “The best way forward for Venezuela would be elections and having a new government in power.” She noted that 2017 is the fourth consecutive year of negative GDP growth for Venezuela; last year, its economy contracted by more than 17%. “There are devastating shortages of food and medicine, and inflation is above 300%. And there is tremendous suffering.”

Move to Consolidate Power

The recent crisis had its first flash point on March 29, when the country’s Supreme Court passed a ruling to assume the functions of the National Assembly, but strong protests forced it to subsequently backtrack. Meanwhile, protestors continued calling for elections and a regime change. Maduro, who was elected in 2013 after the death of Hugo Chavez, signed the executive order to form a new constituent assembly and rewrite the constitution on May 1. “We must modify this state, especially the rotten National Assembly that’s currently there,” he had said.

Opposition leaders are pressing for a removal of the Supreme Court justices who issued the March 29 ruling, general elections in 2017, the creation of a humanitarian channel for medicine imports and the release of all political prisoners, according to a BBC report.

Burke-White did not expect elections to happen anytime soon. He noted that Maduro had indicated that fresh elections would be held as part of the new constitution. “His [United] Socialist Party [of Venezuela] would lose those elections if they were held today,” he said. “Much of this is a move to push those elections out indefinitely.”

Maduro’s plan for the new constituent assembly is to have about half of its 500 members elected directly from among all sections of Venezuelan society, including workers, youth, women, peasants and indigenous people, according to a CNN report. The other half would be made up of delegates chosen from among businesses and workers’ collectives. Kronick noted that the provisions in the rewritten constitution would “undoubtedly … favor the government.” She also predicted that the Maduro government would try to ensure that the convention “is full of delegates that are its supporters.”

Even so, with Maduro’s low approval ratings, Maduro is taking a big risk, according to Kronick. “His approval ratings are so low that even with electoral rules that are extremely favorable to the government, the opposition could potentially gain control of this constitutional convention,” she said. “That could be very dangerous to the government and lead to regime change.”

With growing protests, Maduro had his back against the wall, according to Burke-White. “He didn’t have many cards left,” he said. “This was a tactic that was legal within the constitutional structure — that the president can call for a new constitution — which you wouldn’t undertake if you weren’t in this moment of desperation.”

An Economy Embattled

Along with those political uncertainties, Venezuela’s economy is also in a sorry state. Oil accounts for 96% of the country’s exports, according to World Bank data, and low oil prices have taken a huge toll. Venezuela has the world’s largest proven supply of oil reserves, but much of that oil has high extraction costs, noted Burke-White. “When oil prices fall, those are the first to cease production because it is economically unviable to do so.” What makes that situation worse is the country has lost both technical talent (fired by the Chavez and Maduro governments) and investors, after foreign investments in the sector were nationalized. “They have lost a great deal of oil extraction capacity, which has both increased the cost of production and decreased the ability to keep production up,” he said. “The oil industry is no longer able to provide the economic support that Maduro needs to consolidate, or buy off, power.” Added Kronick: “Chavez had a windfall when oil prices rose, and raked in hundreds of millions of dollars, but they were not well invested and were squandered.”

In addition to low oil prices, the Maduro government’s decisions “to maintain some destructive and expensive exchange control measures, and price controls” are responsible for the food and medicine shortages, Kronick said. “Economists have been urging Maduro to introduce “common sense” reforms for years such as lifting price controls, she added, noting that “price controls create shortages.”

Pressures Closing in on Maduro

Meanwhile, Maduro could face other threats as he tries to cling to power. For one, it is critical for him to ensure the military’s support. However, as the economic misery widens, it also affects the families of members of the military, Burke-White noted. “It is much harder to maintain a military-based regime when you have to point your guns at your own people,” he said. “Maduro realizes that that’s the support base he can’t let slip, and if it does slip, it could well be the end of his regime.” Kronick noted that a popular chant during protests translates from Spanish to English as: “Soldier, listen. Join the protest, join the fight.”

Expectations run high that the Trump administration could impose sanctions on the Maduro government. Sanctions might not work well on an economy that is “already devastated,” and “very much isolated and closed from the rest of the world,” Burke-White said. However, if sanctions are targeted at specific individuals or supporters of the Maduro regime, they might work, he added. “Many of those people have bank accounts and condominiums in Miami, and getting them to feel some of the pain a little bit more might work.” However, targeted sanctions against Maduro’s supporters “could raise exit costs for members of the regime” said Kronick. “If they were to leave power, they won’t be able to go to Miami and enjoy their post-government life, and that could actually make regime change more unlikely.”

The U.S. does not seem to have sufficient “diplomatic capacity” to engage with Venezuela, given the understaffed State Department, said Burke-White. But he did note Thomas A. Shannon, Jr., undersecretary for political affairs, is well versed with the region’s problems. In February, Donald Trump and Mike Pence met with Lilian Tintori, the wife of jailed Venezuelan opposition leader Leopoldo López. “The Trump administration is much more willing to be much more openly critical of Venezuela than the Obama administration was,” he added.

U.S. involvement in working with the Venezuelan opposition or trying to influence a regime change could backfire and strengthen Maduro’s hand, Kronick said. “Certain actions [the U.S.] might take against the government help [Maduro] to be able to more credibly say, ‘This is the imperialist U.S. that is responsible for the problems of the country.’”

Pressure could build up on Maduro also within the region. Venezuela has been an important trading and energy partner in the northern part of South America, and it has provided aid to many countries in the region in the form of oil or cash. But its current status has left it unable to drive economic growth in the region. It has socialist-leaning countries as neighbors, including Cuba, “but those countries are leaning in different directions at the moment,” said Burke-White. He expected Cuba to be more susceptible to U.S. pressure “not to be as supportive a trading, economic or even health care partner for Venezuela” as it has been in the past. Kronick said pressure could come on Maduro from regional forums such as the Organization of American States.

Indeed, some of that has begun. Burke-White noted that the Argentine foreign minister has openly criticized Maduro’s call for a new constitution. “That is unusual given that Latin American and South American states have traditionally been hesitant to criticize one another,” he said. “We’re starting to see the edges of that tacit alliance begin to crack.”